COMMONS AMENDMENTS (Hansard, 2 August 1972)

§ LORD POLWARTH
My Lords, I should like to ask the permission of the House to move that this House doth agree with the Commons in their Amendments Nos. 1 to 3. Amendment No. 1 consists of a new clause replacing the original Clause 3. Amendment No. 2 deletes the original Clause 3 from the Bill. This represents a substantial change in the Bill as it left your Lordships' House. I should perhaps remind your Lordships that Clause 3, both in its original and in its amended form, deals with a matter relating to the Jaw of arbitration in Scotland. The common law of arbitration which applies at present in Scotland is that where a dispute is referred for decision to an arbiter or (where there are two arbiters who fail to agree on their award) to an oversman, the arbiter or, as the case may be, the oversman must decide all the matters submitted to him and he is final on all such matters whether they involve the decision of questions of law or questions of fact. The only course at present open to parties who want any question of law arising between them during an arbitration to be appealable to the courts is to include in the arbitration agreement a provision to that effect. This is not infrequently done.
There are also, of course, certain statutory arbitrations—for example, those under the Agricultural Holdings (Scotland) Act 1949, in the case of which it is provided that questions of law may be appealed to the courts. I should perhaps mention that under existing law it is competent for a party to seek to have an arbiter's award reduced by the court on the ground, for instance, that it was obtained by fraud. But that normally happens after the arbitration is at an end and is distinct from the decision of a question of law which has arisen during the arbitration.
What the clause as it originally appeared in the Bill proposed to do was to provide that all questions of law arising during an arbitration should be referable to the courts for decision. This proposal was founded on the general view that all disputes about law should be subject to appeal to the courts. It has for many years been a rule of the law of arbitration in England that any question of law arising in an arbitration can be submitted to the courts for decision. 417 It is also the rule in several of the countries of the European Economic Community.
The Government—and the official Opposition are on record as sharing the same view—would have been content to see the clause remain in the Bill in its original form. But there was considerable opposition to it from legal sources, such as the Scottish Law Commission, the Law Society of Scotland and the Faculty of Advocates, and from other professional and some industrial sources, such as the Scottish Office, the Confederation of British Industry, the Institute of Arbitrators and the Scottish section of the Federation of Engineering Contractors. The burden of the objections has been that the clause would destroy, or at least seriously impair, some of the most desirable features of the existing common law of arbitration in Scotland.
The most important of these features are said to be: first, the confidential nature of arbitration proceedings, which, unlike court proceedings, are not reported and do not attract public attention; secondly, that because the right of appeal to the courts is excluded arbitrations are disposed of more expeditiously; and, thirdly, that arbitration is a relatively inexpensive method of settling disputes. It is said that a provision enabling parties to arbitration to refer questions of law to the courts would lead to delays and would add appreciably to the financial burden falling on parties to arbitration.
In the light of these objections it was felt that some modification of the proposal in the original clause should be made. While the clause should still give expression to what seems the eminently reasonable view that questions of law ought to be subject to decision by the court of law, even when they arise in arbitration proceedings, it should none the less enable parties to arbitration agreements, who do not desire that the courts should have any part to play in disposing of questions of law, to leave legal questions to the final decision of the arbiter. The amended Clause 3 which now appears in the Bill so provides in subsection (1) Subsection (2) provides that the clause is not to apply to any statutory arbitration which provides for questions of law to be appealable to the courts. Subsection (3) states that the clause is 418 not to apply in the case of an arbitration relating to industrial disputes.
The provision about arbitration in the field of industrial relations was added at the Report stage in another place by agreement between Government and Opposition, because adequate arbitration machinery already exists under the Industrial Courts Act 1919, as amended by the Industrial Relations Act 1971, and it is agreed on all sides that questions arising in such arbitration should not be the subject of litigation before the ordinary civil courts. Subsection (4) of the amended Clause 3 limits the application of the clause to agreements referring disputes to arbitration which were entered into after the date on which the clause is to come into operation. Agreements entered into before that date will therefore be entered into on the assumption that no appeal to the Court of Session will be available.
I think it will be convenient to the House if at this stage I mention briefly Amendment No. 3, which is consequential on Amendment No. 1, and I hope that it will be in order for me to do so. In regard to it, I should simply explain that it has been found that it will be necessary for Rules of Court to be made before Clause 3 can come into operation effectively. I understand that at present there is not the internal procedure available in the courts and it has to be constructed. The Amendment to Clause 5(3) therefore adds the reference to Clause 3 to the reference to Clause 1 which is already in the subsection. It will not therefore come into operation until the Order for that purpose is made and time for the making of the necessary Rules of Court can be provided.
The Scottish Law Commission have said that they are content with the clause, as amended. It is true that the amended clause has not met in full the criticisms made by other bodies, but parties to an arbitration who do not wish any question of law to be referable to the courts now have it in their own hands to exclude the court by contracting out of the clause, and no doubt the organisation concerned in the matter will advise their members of the drafting of arbitration agreements in the future. My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 1 to 3.

LORD WHEATLEY
My Lords, I paused because I thought that the noble Lord, Lord Hoy, was going to speak on these Amendments. Like the noble Lord, I have been waiting since 2 o'clock in order to reach Scottish Business. I make no complaint about that, because I was thereby able to develop my further education in law, albeit in relation to a system of law which is perhaps rather foreign to us North of the Border. But the study of comparative law is of great benefit to lawyers not only in relation to what you find out ought to be done, but also in relation to what you find out ought not to be done. So from that point of view the afternoon and evening were quite beneficial so far as I am concerned. I should include in the "patience stakes", apart from the noble Lord, Lord Hoy, the noble Baroness, Lady Elliot of Harwood—although I am in some doubt as to how I should refer to her in view of her intervention at an earlier stage.
I hesitate at this late stage to introduce anything of a long-term nature, but I cannot let the occasion pass without expressing my agreement with the Amendment which has been proposed by the noble Lord, Lord Polwarth. He has given us, first, a review of the common law of Scotland in relation to arbitration, and then of the history and development of this Bill. I will content myself with the words which we are accustomed to use in the courts, and say that I concur and I have nothing to add. But the issue which was raised in relation to the original clause has narrowed down to the question of whether or not in the situation now before us the parties to the arbitration should contract out of reference to the law courts, or should contract in. The question of whether there should be a contracting out or a contracting in should, in my opinion, be determined in the first place by relation to what the norm should be. You should first establish what is the norm, and then in relation to that you either contract in or contract out.
The issue is whether there should or should not be as a norm the right of appeal on a question of law to the court— 420 by "the court" I mean the Court of Session. May I say, in parenthesis, that I noticed that when this Bill was in another House when reference was made to "the Court of Session" it was translated in the OFFICIAL REPORT into "the Quarter Sessions". There is nothing new in that, because over 18 years ago, when I was a Law Officer of the Crown, I suffered from the same disadvantage whenever I made a speech in which I made reference to the Court of Session. And it might be desirable if we had a glossary of terms for the benefit of the English people who do not quite understand our own particular terminology.
The question is whether or not there should be a right of appeal by way of stated case to the Court of Session. I submit to your Lordships that, as a matter of principle, questions of law should be determined by the courts of law. That would appear to be almost axiomatic. When matters are referred to arbitration they relate to a very large area, and to very varied subjects. In these circumstances it is normal for the person who is appointed as arbiter, or the oversman, to be a person with specialised knowledge and experience in the particular field in which the arbitration takes place. But in many cases—I might say in most cases—he is a person chosen for his professional knowledge and experience in that field, and not because of any legal qualifications. When the issue has to be determined the questions arising may be questions of fact or questions of law, or mixed questions of fact and law. In these circumstances it is not surprising, if questions of law intervene, that the chosen arbiter or oversman may not be qualified to express an opinion on these legal matters. It would therefore appear to be axiomatic that there should be some procedure whereby, in the normal case, these matters can be referred to the appropriate court for determination. If that be accepted —and I think it should be because it seems to me to be logical, sensible and right in principle—it follows that if the parties wish mutually to exclude any reference to the courts on matters of law the appropriate way of doing that is by contracting out of what would otherwise be the normal procedure.
I have dealt at some length with this point simply because I understand that in 421 Scotland there is still a certain amount of discussion as to whether it should be the contracting in or contracting out principle which should prevail. In my opinion, Her Majesty's Government were correct in adopting the contracting-out principle, thus recognising that it is right in principle to leave matters of law to the courts of law, where appropriate, unless the parties are mutually agreed otherwise. I would commend the clause, as amended, to your Lordships.

§ LORD HOY
My Lords, I hesitate to intervene. I am sorry that there has been any misunderstanding, but I thought it only right to allow the noble and learned Lord, Lord Wheatley, to give us his opinion on this proposal. Frankly, I have not had the benefit of my legal adviser's advice. There was only one thing about which I could make up my mind. Apparently Amendments have always to be put down in four sections, the first one stating what one might do, and the others stating what one must not do. That is the wrong way to go about it.
There was one thing that disturbed me. On the whole, arbitration has worked reasonably well, and a definition of the oversman is now available to us—I do not think the term is in use in England; only in Scotland. But, whether we like it or not, many people, when they are going to arbitration, want if possible to avoid the courts, not because they are afraid of the courts but because they are afraid of the expense which might be entailed. When the Government first set out their clause as it was there was very good reason for so doing. But when the noble Lord, Lord Polwarth, read out the number of people who had objected to it I wondered who had. supported it, apart from the Parliamentary draftsmen; but in their favour I might say that they were reflecting the opinion of people in Scotland. If we have all these assurances that this is not going to work well, and with contracting-out if the parties so wish it, there is a safeguard for them. So, on the whole, I raise no objection to the proposal.